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Paul Marriage, manager of the Cazenove UK Smaller Companies fund, a pick of Citywire Selection, talks about the stocks he likes best.

Lagging 'deep value' rally

Cazenove UK Smaller Companies manager Paul Marriage has been happy to lag the sharp rally in small and medium-sized stocks at the start of 2012 because he believes his focus on quality stocks makes him better placed to pick out the long-term winners.

Marriage's fund posted a return of 5.2% in February, compared with the UK smaller company index's 7.9% return, while the medium-sized stock index managed a return of 6.7%. But Marriage thinks the rally has been indiscriminate, boosting the price of resources stocks he tends to avoid.

'A rising tide catches all boats, and we will probably be a few months behind [in the rally] as we tend to lag a rising market,' he said.

Smart Metering leads fund returns

Nevertheless, Marriage has seen continued strong performance from a diverse range of stocks that he believes can continue to grow profits and revenues at a steady and recurring rate.

A good example is digital gas meter supplier Smart Metering(SMSS.L), which Marriage initially bought when it floated on the stock market last year. The stock was Marriage's standout performer over the past few weeks after he bought in at 60p, and had doubled in price to £1.20 by 5 March.

'There was a dual trigger this month with both a solid trading statement that led to small upgrades and a competitor business looking to float as well,' he said. While Marriage now thinks the stock is 'a little overvalued' at present, he continues to back it.

'We feel that the long-term growth opportunity and utility-like recurring revenue generation will continue to make this an attractive investment.'

Walter Greenbank 'looking cheap'

He describes Walker Greenbank, which owns soft furnishings brands Sanderson and William Morris, as something akin to a luxury goods group, and uses Mulberry(MUL.L)'s buying power as a comparison.

'Walker Greenbank has sales of around £80 million compared to Mulberry's £170 million. It has a market cap of £50 million and is on seven times one-year earnings. Mulberry has a market cap of £1.1 billion and a valuation of around 20 times one-year earnings, so we think Walker Greenbank looks very cheap,' Marriage said.

Pendragon added on market weakness

Marriage has used market weakness to add car dealership Pendragon(PDG.L) to the portfolio while he has taken some profits from Ulster TV, Domino Printing(DOPR.L) and Immunodiagnostic Sytems(IDH.L) after strong runs in the recent rally.

i second dr. john a lot of the time i don't even bother to open citywire emails its as though someone has given a half brain poetic license in the artwork dept, not necessary, not needed and not wanted,

I agree totally about some of the ads being really annoying, but shouldn't one be taking out one's frustration on the advertiser by making the point to them that their ads are so annoying that we wouldn't buy their product on principle? The message that an ad turns people off rather than turns them on should ultimately get the advertisers to modify the ads so they are less offensive to their target market.

Or download Adbblock Plus which is easier to use. I was completely unaware of the aforementioned coloured balls because I generally don't see ads. I also use Firefox instead of Internet Explorer because it has a built in pop-up blocker. You can enable ads and pop-ups for particular pages or whole sites if you wish.

Of course if we all blocked all the irrelevancies and annoyances we would have to pay to access sites like this which depend on advertising and sponsorship!

Advertising and marketing departments are generally staffed by tasteless morons, Told "I hate your ad". They would undoubtedly reply, "But you noticed it!" and believe (I don't say think) that any publicity is good publicity. Tell them that you are not going to buy their product and they will believe, but not say (unless their name is Gerald Ratner), that you would not buy their product anyway because it is Cheap Rubbish at Absurd Prices. They don't care about annoying intelligent people who anyway ignore advertising. They might possibly go so far as to remove advertising from a site where people with taste and judgement are to be found. You don't see bingo or junk food advertised in the FT.

Which leaves this site with the interesting dilemma of whether to refuse any similar future advertising, at the risk of alienating the moron placing the ad, or accept it and risk alienating us.